Market Valuation and Merger Waves

Authors: MATTHEW RHODES-KROPF; S. VISWANATHAN

Source: The Journal of Finance, Volume 59, Number 6, December 2004 , pp. 2685-2718(34)

Publisher: Blackwell Publishing

Key:
Free Content - Free Content
New Content - New Content
Subscribed Content - Subscribed Content
Free Trial Content - Free Trial Content

Abstract:

Does valuation affect mergers? Data suggest that periods of stock merger activity are correlated with high market valuations. The naïve explanation that overvalued bidders wish to use stock is incomplete because targets should not be eager to accept stock. However, we show that potential market value deviations from fundamental values on both sides of the transaction can rationally lead to a correlation between stock merger activity and market valuation. Merger waves and waves of cash and stock purchases can be rationally driven by periods of over- and undervaluation of the stock market. Thus, valuation fundamentally impacts mergers.

Document Type: Research article

DOI: 10.1111/j.1540-6261.2004.00713.x

The full text electronic article is available for purchase. You will be able to download the full text electronic article after payment.

$41.89 plus tax      Refund Policy

 

OR

Back to top

Key:
Free Content - Free Content
New Content - New Content
Subscribed Content - Subscribed Content
Free Trial Content - Free Trial Content
Share this item with others: These icons link to social bookmarking sites where readers can share and discover new web pages.
Page Help Click here for Page Help
Shopping cart
Tools
Sign in






Need to register?
Sign up here
Text size: A | A | A | A